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Facts
The revenue appealed the CIT(A)'s order for AY 2017-18, which deleted various additions and disallowances made by the AO in an assessment under section 144 of the Income-tax Act, 1961. The additions/disallowances challenged included those under sections 68 (cash deposits during demonetization), 69A (investment source), 14A (disallowance of expenditure for exempt income), and 37(1) (general expenses), along with others related to inventories, rent, 'kumaoni rasoi' payments, depreciation, and unsecured loans.
Held
The Tribunal noted that for most issues (Grounds 1-3 and 5-10), the AO had accepted the assessee's contentions in remand proceedings, and the CIT(A) granted relief based on the AO's remand report. Regarding Ground 4 (Section 14A disallowance), the Tribunal held that since the assessee derived no exempt income during the year, Section 14A provisions were not applicable. Citing judicial precedents, the Tribunal found no grievance for the revenue on any ground and dismissed the appeal.
Key Issues
Whether the CIT(A) was justified in deleting additions and disallowances made by the AO, especially when the AO himself had accepted the assessee's contentions in remand proceedings; and whether disallowance under Section 14A is warranted in the absence of any exempt income.
Sections Cited
144, 68, 69A, 14A, 8D, 37(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “H”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI VIMAL KUMAR
O R D E R PER M. BALAGANESH, A. M.: The appeal in AY 2017-18, arises out of the 1. order of the Commissioner of Income Tax (Appeals)-24, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. CIT(A), Delhi-1/10385/2019-20 dated 11.10.2023 against the order of assessment passed u/s 144 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 17.12.2019 by the Assessing Officer, DCIT, Circle-3(1), New Delhi (hereinafter referred to as ‘ld. AO’).
The revenue has raised the following grounds of appeal before 2. us:-
“1 The Id. CIT(A) has erred in deleting the addition made by the Assessing Officer amounting to 50,68,350/-u/s 68 of the Act on the issue of cash deposited during the demonetization period. The Id. CIT(A) has failed to consider any cash book showing the day-to-day receipt of cash as well as cash expenditure to substantiate the cash in hand. The Id. CIT(A) has failed to examine any authentic documents to explain the source of cash deposits made during the demonetization period The Id. CIT(A) has erred in considering the abnormal increase in cash deposits during the period of demonetisation compared to pre-demonetisation period. 2 The Id. CIT(A) has erred in deleting the addition of Rs 3,60,50,216/- made u/s 69A of the Act as the Source of investment made by the assessee- company had not been substantiated with documentary evidence. 3 The Ld. CIT(A) has erred in deleting the addition of Rs.2,27,19,026/- made by the AO on account of inventories. The Id. CIT(A) has erred in deleting the addition made by the AO without considering the facts of the case that the assessee has reduced the inventories to Nil. The bills raised before the Government of Uttar Pradesh either may have been cleared by the Government of UP or must have been under settlement or dispute resolution. Booking entries of UP Government on assumption basis as loss is not justifiable, 4 The Id. CIT(A) has erred in deleting the disallowance u/s 14A of the Act r.w.r 8D of IT Rules, 1962 amounting to Rs.1,80,251/-. The Ld. CIT(A) has erred in not considering the CBDT circular No 5/2014 dated 11.02.2014, clarifying that section 14A r.w.r. 8D provides for disallowance of the expenditure even where the tax payer has not earned any exempt income.
The Ld. CIT(A) has erred in deleting the disallowance made by the Assessing Officer of Rs. 10,64,995/- which was only 10% of the total expenses of Rs.1,06,49,951/-, The Ld. CIT(A) has erred in considering the genuineness of the expenses of Rs.10,64,995/- incurred during the year under consideration.
The Ld CIT(A) has erred in deleting the disallowance made by the Assessing amounting to Rs.32,13,000/- paid on account of rent during the year under consideration. The Ld. CIT(A) has erred in deleting the disallowance made by the Assessing Officer of Rs.32,13,000/- as the expenses incurred on account of rent was not for business purpose and there was no agreement was executed between the assessee-company and landlord.
The Ld. CIT(A) has erred in deleting the disallowance made by the AO u/s 37(1) of the Act amounting to Rs. 1,23,94,635/-, The Ld. CIT(A) has erred in considering the genuineness of the expenses amounting to Rs.1,23,94,635/- incurred during the year under consideration.
8 The Ld. CIT(A) has erred in deleting the disallowance made by the AO of Rs.3,75,000/- on account of kumaoni rasoi and cash payment. The Ld. CIT(A) has erred in deleting the disallowance made by the Assessing Officer amounting to Rs.3,75,000/- as the assessee- company had declared cash vouchers for payment towards kumaoni rasoi. 9 The Ld. CIT(A) has erred in deleting the disallowance made by the AO amounting to Rs.3,09,429/-on account of depreciation The Ld. CIT(A) has erred in deleting the disallowance made by the AO amounting to Rs.3,09,429/- as the assets was not used more than 180 days during the year under consideration. 10 The Ld. CIT(A) has erred in deleting the addition made by the Assessing Officer amounting to Rs.33,06,853/-on account of unsecured loans. The Ld CIT(A) has erred in deleting the addition of Rs 33,06,853/- made by the AO on account of unsecured loans without considering the creditworthiness and genuineness of the lender company.
We have heard the rival submissions and perused the material available on record. At the outset, we find that the entire issues raised by the revenue except ground No. 4 in their grounds of appeal were accepted by the ld AO in the remand proceedings and the ld CIT(A) had granted relief to the assessee after considering the remand report of the ld. AO. No adverse comments were given by the ld AO in the remand proceedings. We find that the ld CIT(A) had taken cognizance of the remand report while adjudicating each issue and had granted relief to the assessee. In our considered opinion, there could be no grievance that could be left to the revenue. Hence, logically the revenue ought not to have even preferred an appeal on these issues since, the ld AO had accepted to the contentions of the assessee in the remand proceedings. Reliance in this regard is placed on the decision of the Hon’ble Madras High Court in the case of Smt B Jayalakshmi Vs. ACIT reported in 96 taxmann.com 486 (Mad HC). Accordingly, Ground Nos. 1 to 3 and 5 to 10 raised by the revenue are dismissed.
4. Ground No. 4 raised by the revenue is challenging deletion of disallowance u/s 14A of the Act. We find that there was no exempt income derived by the assessee during the year under consideration and hence there cannot be any applicability of provisions of section 14A of the Act. Reliance in this regard is placed on the decision of the Hon’ble Jurisdictional High Court in the case of PCIT Vs. Era Infrastructure Ltd reported in 448 ITR 674 (Del). Respectfully following the same, ground No. 4 raised by the revenue is dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 11/10/2024.